DOING
BUSINESS
IN
$5*(17,1$
HLB $UJHQWLQD
Wirtschaftsprüfungsgesellschaft
doing business
in Argentina
foreword
This booklet has been prepared for the use of
clients, partners and staff of HLB International
member firms. It is designed to give some general
information to those contemplating doing business in
Argentina and is not intended to be a
comprehensive document. You should consult us
therefore before taking further action. Estudio Della
Rocca – Piazza - Almarza and HLB International
cannot be held liable for any action or business
decision taken on the basis of information in this
booklet.
Laws in Argentina that regulate businesses and
taxes are numerous and complex. Therefore we
would advise you to consult an HLB International
member firm in Argentina before taking any specific
action.
Estudio Della Rocca – Piazza - Almarza
Issue date: May 2014
2
about HLB International
Formed in 1969, HLB International is a worldwide network of independent professional
accounting firms and business advisers. The
network comprises member firms in more than
110 countries who, collectively, have over
16,000 staff in 500 offices. Member firms
provide clients with a comprehensive and
personal service relating to auditing, taxation,
accounting
and
general
and
financial
management advice
Up-to-date information and general assistance
on international matters can be obtained from
any of the member firm partners listed in this
booklet or from the Executive Office in London.
HLB International
Executive Office
21 Ebury Street
London SW1W OLD
UK
Telephone +44 (0)20 7881 1100
Fax +44 (0)20 7881 1109
Email: [email protected]
Website: www.hlbi.com
HLB International is a world-wide network of
independent professional accounting firms and
business advisers each of which is a separate and
independent legal entity and as such has no liability for
the acts and omissions of any other member. HLB
International Limited is an English company limited by
guarantee which co-ordinates the international
activities of the HLB International network but dows
not provide, supervise or manage professional
services to clients. Accordingly, HLB International
Limited has no liability for the acts and omissions of
any member of the HLB International network, and
vice versa.
3
contents
FOREWORD
2
ABOUT HLB INTERNATIONAL
3
GENERAL INFORMATION
Location and Climate Population and
Religion Political Institutions Currency
and Language Education
5
ABOUT THE ECONOMY
Prices
State reform and legislation Growth of the
economy Financial system Foreign sector
6
FOREIGN INVESTMENT
Legal framework
applicable to foreign investment Judicial
Power and dispute settlement Technology
transfer Free foreign currency market
Bilateral treaties on investment Economic
agreements in the region
8
LABOR LEGISLATION
Labor rights
Social security contributions Labor risks
system Unemployment rates
11
INCORPORATION OF COMPANIES
Main forms of incorporation
Legal requirements Professional accounting
rules
12
5
TAXATION
13
General structure Income Tax
Minimum Assumed Income Tax Personal
Property Tax Value Added Tax (VAT)
Internal Taxes on specific goods and services
Customs and importation duties
Taxes for social security purposes
Tax on interest and business indebtedness
Turnover Tax / Stamp Duty
Real Property Tax / Municipal rate
18
CONTACTS IN ARGENTINA
19
4
GENERAL INFORMATION
Location and Climate
Argentina is the second largest country in
Latin America. Its area is 2,800,000 square
kilometers, located at the South of the
American continent, with a length of 3,700 km
from North to South, and 1,400 km from East
to West.
The country borders in the North with Bolivia,
to the Northeast with Paraguay, and to the
East with Brazil, Uruguay and the Atlantic
Ocean. To the South its border is formed by
the junction of the Atlantic and Pacific
Oceans, and to the West it borders with Chile.
Given the vast size of the country, Argentina
has a variety of climates, from very warm and
tropical in the North, to extremely cold and
polar in the South. The weather in Buenos
Aires and its surroundings is moderate and
pleasant.
Population and religion
Towards the end of the 19th Century,
Argentina had a great influx of immigrants,
mainly from Europe. The number of
inhabitants according to the 2010 census is
40.2 million, most of them being of European
descent, over 32% living in the City of Buenos
Aires and its surroundings.
The largest foreign communities are Spanish
and Italian, but there are also French,
German, Polish, Swiss, Japanese and other
immigrant groups.
Some demographic information as at 2010:
Population growth: 1.12 % per annum.
Urban population: 89.3%
Life expectancy at birth: 75.3 years
The official religion is Roman Catholicism, but
there is absolute religious freedom. Other
churches and faiths co-exist harmoniously
including Judaism, Islam and Buddhism.
Political Institutions
Argentina became independent from Spain in
1816.
The
Argentine
Nation
adopted
the
representative (democracy), republican (3
independent
powers)
and
federal
(autonomous provinces) form of government.
The National Constitution, in force since 1853,
was most recently amended in 1994. The
National Executive Power is held by the
President and Vice-President of the country,
who are elected for a 4-year term, both with
the possibility of being re-elected once.
The National Legislative Power is held by the
Senate (representing the Provinces of the
Nation) and by the House of Representatives
(representing the citizens).
The Supreme Court of Justice, the Federal
Courts and the Federal Judges compose the
National Judicial Power. Similar systems are
in place in the Provinces.
The country is divided into 23 autonomous
provinces and the City of Buenos Aires.
(Federal Capital City).
Currency and Language
The local currency is the Peso whose
exchange rate against other countries has
floated freely since January 2002 when the
1991 Convertibility Act was repealed. This Act
had obliged the Central Bank to sell without
restrictions all the US Dollars that it was
asked to at a rate of 1 Peso to 1 Dollar. The
Act also obliged the government to hold gold
and foreign currency reserves equal to the
total amount of money issued by the Central
Bank.
The Repeal of the Act led to a rapid
devaluation of the Peso by over 70%
The official language of Argentina is Spanish.
Education
With the highest literacy rate in Latin America
(98.1% in 2010), Argentina has a highly
qualified labor force. The latest educational
reform at national level emphasizes the
importance given by the state to this issue,
having as one of its main goals to supply
5
professionally qualified people according to
the productive needs of the future and to
make
a
full
high-school
education
compulsory, something that has already
begun to be implemented in some provinces.
The large number of tertiary level and higher
education institutions allows Argentina to
have a high percentage of university students.
This percentage is increasing, due to the
recent creation of institutions outside
metropolitan and central areas.
Quality of life is comparable to that of
industrialized countries, especially in large
Industry
GNP Millions of pesos
Natural resources
manufacturing
building
commerce
Since then, these are the figures from the
annual inflation index:
2002 118 %
2005 10.7 %
2008 8.8 %
2011 12.7 %
2003 2 % 2006 7.1 % 2009 10.3 % 2012
10.8 %
2004 7.9 % 2007 14.6 % 2010 14.6 %
2013 10.9 %
2004
2006
2008
2010
2012
412,306
17.8%
24.1%
4.2%
11.7%
600,256
16.1%
22.4%
5.7%
11.4%
939,506
15.0%
21.3%
6.0%
12.0%
1,311,075
14.8%
20.5%
5.6%
12.2%
1,952,021
13.8%
19.6%
6.0%
13.4%
9.1%
6.4%
21.5%
5.2%
100.0%
8.8%
7.7%
22.4%
5.5%
100.0%
8.4%
8.5%
22.7%
6.1%
100.0%
8.1%
8.7%
23.1%
7.0%
100.0%
8.0%
9.5%
22.0%
7.7%
100.0%
transport
communication
education, health
service
government
urban centers in which almost 90% of the
population lives, where a vast and intense
cultural activity takes place.
ABOUT THE ECONOMY
Prices
From 1975 to 1989 Argentina had 3 digit
figures in its annual inflation index. In 1989
and 1990, annual hyperinflation reached the
four digits. The changes made in 1991 started
to reduce inflation significantly as shown
below:
1991
2000
1992
2001
1993
The political and economical crisis which
arose at the end of 2001 led to an inflation
rate of 118% in 2002; this was reduced to 2%
in 2003.
84.0% 1994 3.9% 1997 0.3%
2.4%
17.9%
1995 1.6%
1998 (6.3%)
(5.3%)
7.4%
1996 0.1% 1999 1.2%
State Reform and Legislation
In 1989, the Argentine Congress enacted the
State Reform Law implemented through an
ambitious long term plan that lead to
numerous privatizations (more than 180 in 3
years), including gas and electricity utilities
and their respective distribution companies,
telecommunications, railroad, aviation and
hydrocarbon companies.
The Law of Economic Emergency passed in
September 1989 started a wide-ranging
deregulation program that includes foreign
investment,
capital
markets,
domestic
markets for goods and services and
regulatory agencies. Existing regulations were
eliminated on interest rates, currency
exchange, price and salary controls as well as
6
a set of local requirements (subsidies and tax
agreements of preferential nature) that were
damaging the development of the free market.
The Convertibility Law passed by Congress in
April 1991 completes the set of three
fundamental laws of profound structural
reforms made by Argentina, establishing a
strict mechanism that has been effective in
achieving stability and reducing inflation.
According to this law, the Argentine Peso
must be fully backed by reserves of foreign
currency and gold, at a fixed exchange rate of
one Peso to one US Dollar.
These economic policies were followed until
2001 but from 2002 the growing level of state
borrowing, the defaulting on government
debts and the political crisis which was
affecting the country led to a change in policy
with and end to parity between the Peso and
the Dollar. The consequences of this for the
country as a state were basically an increase
in uncertainty as to the legal position and an
absence of credit facilities (from foreign
lenders).
in million of US$
Share of each industry in GDP:
Distribution of expenses
households in 2012/2013:
incurred
by
- Food and drink: 33.2 %
- Housing, equipment and maintenance: 7.3
%
- Transportation and communications: 18.6 %
- Health: 5.6 %
- Entertainment and culture: 8.4 %
- Clothing and shoes: 8.7 %
- Education: 2.9 %
- Miscellaneous goods and services: 5.2 %
- Real estate, fuel, water and electricity: 10.2
%
Finally, there is still a wide range of business
opportunities in services and infrastructure,
including pending privatizations. Industries
such as transportation, electricity, water,
2004
2006
2008
2010
exports
34,576
46,546
70,019
68,134
imports
22,445
34,154
57,463
56,502
balance
12,131
12,392
12,556
11,632
Growth of the Economy
Argentina has a diversified productive base
founded on its natural resources and a long
industrial territory, 8th in the world, with 80%
of productive fertile land) abundant in all types
of resources: agricultural soil, pastures, water
resources, forests, mineral resources and
hydrocarbons fields.
Many of them are in the initial stages of their
productive exploitation, as in the case of
mining and forestry, governed by specific and
suitable legislation, and due to their high
productivity and profitability, they provide very
good business opportunities.
environment, tourism, telecommunications, to
name only a few, are showing good
opportunities for growth and profitability.
Financial Systems
The Argentine financial system is made up of:
- capital market
- foreign currency market
- financial market
By means of the capital market both
companies and the government obtain
financing from investors by means of shares
and public and private securities.
In this market, the Stock Exchange, the
Securities Market, Stock Brokers, mutual
7
funds, among others, interact under the
supervision of the National Securities
Commission and the Argentine Central Bank.
From May 2004 the Central Bank of Argentina
("B C R A") has in place some controls over
the foreign exchange markets. Foreign
currency derived from exports must be sold in
Argentina and liabilities incurred abroad must
be settled from Argentina.
In the financial market, the Argentine Central
Bank is the controlling authority, and there are
several types of entities including:
- Commercial banks
- Investment banks
- Mortgage banks
- Development banks
- Financial institutions
- Representative offices
In October 2011, the Government started to
apply a restrictive measure to limit access to
the foreign currency exchange market. This
regulation applied to persons who were
interested in obtaining foreign currency for
saving purposes.
In 2012, this measure extended to companies
which had to transfer funds abroad, whether
to pay for imports or to pay dividends. They
had to request the Central Bank for
authorization.
Then, this situation affected the purchase of
currency to travel abroad. At the same time,
purchasing foreign currency for saving was
forbidden.
Finally, in January 2014, the Government
became more flexible with these regulations
and allowed persons to purchase foreign
currency for saving purposes.
Foreign Sector
Argentina trade with other countries in recent
years is summarised in the following table:
Since 2010, the Government have been
increased the number of regulations over
trading goods.
In 2002 Argentina defaulted on its state debts
and a renegotiation with its creditors started.
Argentina offered state debt holders two
national debt swaps in 2005 and 2010, which
were accepted by 93% of the title holders and
which implied a debt remission on the 65% of
the capital and interest savings. The holders
who did not accept the swap conditions
(holdouts) decided to sue Argentina at
International Courts (New York) and claimed
the payment of the 100% of their credits –
around U$s 1,300 million.
Judge Thomas Griesa as well as the Court of
Appeal pronounced against Argentina. The
appeal to the United States Supreme Court
was still in progress on March 2014.
FOREIGN INVESTMENT
Legal framework applicable to foreign
investment
The Argentine Constitution was drawn up in
1853, and recently amended in August 1994.
It establishes the type of government and
individual rights and guarantees for all
inhabitants of the country. It has a broad and
generous approach, as it guarantees to
foreigners – in the same way as to Argentine
citizens – the right to work, do business,
purchase, sell and own property, etc., and it
provides private property is legally protected
and no inhabitant of Argentina can be
deprived of it, except under a final court
decision. Therefore, private entities, both
national and foreign, enjoy full rights to
establish and own corporations and to
participate in all sorts of productive activities.
Individuals and private entities can freely
establish, purchase and dispose of these
productive
and
commercial
business
activities.
8
The Argentine Constitution guarantees equal
treatment for local and foreign investors
(Section 20).
Therefore, Act 21.382 of Foreign Investment,
with its amendments of 1993, places national
and foreign investors in an equal status, and
provides explicitly that both equity and profits
can be transferred abroad at any time. Equal
treatment means that foreign investors are
treated in the same way as local investors for
tax purposes. Furthermore, they are entitled
to make use of local credit lines, and to make
equity and profit transfers in and outside of
the country without requiring an approval. The
waiting period for capital repatriation as well
as the need to register foreign investments
have been eliminated.
This law provides that foreign companies may
invest in Argentina without the need to obtain
a prior approval of any kind and in a totally
equal status with national companies,
regardless of the amount involved or the
industry; the principle being that foreign
investors receive the same treatment as
Argentine nationals.
Also simple and virtually free of proceedings
and approvals is the repatriation of capital
invested and the transferring of profits
overseas, which may be done any time,
regardless of the time elapsed since the
establishment of the investment in the
country. There is open access to the free
foreign currency market. There are no taxes
applicable to the transferring of profits and
dividends originated from foreign capital.
There is no obligation to inform or register
investments planned or made, nor any
requirement as to return on investments to be
complied with by foreign investors.
In certain areas such as banking and
insurance, there are special by-laws that
require all operators to apply for permits.
Foreign and national investors have
guarantee of access to them on an equal
status.
Foreign investors are entitled to use any
corporate structure recognized by the
Argentine law (Law of Corporations 19.550),
and thus, to participate in the market through
the most convenient available means, such as
merger, takeover, cooperatives or jointventures. As a result of the nondiscrimination
principle, national and foreign companies
receive the same treatment by law, including
access to financing in local or foreign
currency in the short, medium or long term in
thelocal market, and a full capacity to take
advantage
of
economic
development
incentive programs.
The legal treatment of foreign investment is
set out in international law in over 40
international treaties.
Judicial power and dispute settlement
The Judicial Power is independent and
responsible for the respect and due
safeguarding of all rights and guarantees
provided for in our National Constitution, as
well as compliance with laws and treaties
entered into with foreign countries.
There are procedural laws which control the
carrying out of court judgements and the
performance of arbitration decisions made
by foreign courts, and which give the
contracting parties the power to decide on
the jurisdiction of the Courts hearing the
case in dispute. Finally, Argentina is a
member of the International Centre for
Investment Dispute Settlement (CIADI) and
has agreed clauses referring to the
application of international rules and
procedures for settling disputes in various
bilateral and/or regional treaties on
investment.
Technology transfer
Act 22.426 passed in March 1981 refers to all
those contracts having as main or for
accessory purpose the transfer, assignment
or granting of licenses for technology or
brands of foreign origin registered by
individuals or corporations not resident in
Argentina when the contracts have to be
complied with in the country and are for a
valid consideration.
Contracts to which the Armed or Security
Forces are a party and which the National
9
Executive Power has classified as military
secrets are exempted from the provisions of
this law.
However from 2002 following the heavy
depreciation of the peso the B C R A has
introduced some exchange controls.
According to the regulations, technology
includes industrial patents, models and
designs and all technical forms of know-how
to manufacture a product or provide a service.
In October 2011, the Government started to
apply a restrictive measure to limit access to
the foreign currency exchange market. This
regulation applied to persons who were
interested in obtaining foreign currency for
saving purposes.
Contracts that include technology transfer
according to the aforementioned definition
must be registered with the National Institute
of Industrial Property (INPI) only for
information purposes.
There are no penalties for not registering, but
they are simply excluded from the possibility
of deducting the amount paid for tax
purposes, and the foreign beneficiary will be
required to pay taxes on the total amount
received, with no right to deducing expenses.
Contracts must be submitted in Spanish or
have the corresponding translation attached
to them.
Free foreign currency market
In 2012, this measure extended to companies
which had to transfer funds abroad, whether
to pay for imports or to pay dividends. They
had to request the Central Bank for
authorization.
Then, this situation affected the purchase of
currency to travel abroad. At the same time,
purchasing foreign currency for saving was
forbidden.
Finally, in January 2014, the Government
became more flexible with these regulations
and allowed persons to purchase foreign
currency for saving purposes.
In
December
1989,
the
Argentine
Government eliminated all exchange controls
and adopted a free foreign exchange market,
where fluctuations are based on the law of
supply and demand.
Bilateral treaties on investment
Previously, there were different rates and
exchange control with frequent amendments
to the rules.
Argentina is an active member in the
Multilateral Investment Guarantee Agency
and the Overseas Private Investment
Corporation. Both insurance companies cover
foreign investments for political risks such as
exchange controls, seizures, wars and
mutiny, as well as other risks, provided that
the investment project has the written
approval of the Argentine Government.
In April 1991, the national government passed
a law declaring the convertibility of local
currency in relation to the US dollar (1 Peso =
1 US Dollar in terms of the "Peso" adopted as
local currency, in force since January 1,
1992). In this respect, the Argentine Central
Bank has agreed to back the currency with
gold and in free availability.
Both individuals and corporations can have
foreign currency in a totally free way, they can
have current accounts in foreign currency with
local Banks, collect interest amounts in
foreign currency or sell property and collect
payment for it in foreign currency.
The legal treatment of foreign investment in
Argentina has been set out in international
law in over 40 international treaties.
Argentine laws provide that written approval
will not be refused unless the investment
project breaches some existing law, which
does not take place in practice given the vast
freedom of the legislation applicable to foreign
investment.
Economic agreements in the region
10
As from January 1, 1995, Argentina
established, together with Brazil, Paraguay
and Uruguay, a customs union called
Mercosur, with a vast territory of 12 million
square kilometers, populated by 225 million
inhabitants with a total GDP of 1.2 trillion US
dollars including the states associated to
Mercosur – Chile and Bolivia – which is today
one of the most dynamic regional economic
organisations in the world on a world scale.
The customs agreement consists in the
elimination of intrazone duties and non-tariff
restrictions (among member countries),
establishing a common external tariff and the
coordination of commercial, industrial and
macroeconomic policies.
In addition, a free trade zone was established
with Chile and Bolivia, similar to NAFTA, as
these economies are also in expansion and
about to join Mercosur, along with Venezuela.
LABOR LEGISLATION
Hours worked in excess of the basic working
day are paid as overtime equal to an
additional payment of 50% of the normal
working hourly rate. Hours worked on
Saturdays after 1pm, Sundays and holidays
are paid at 100% of the value of normal
working hours.
Vacation: The paid vacation period provided
for by law depends on the number of years
worked for the employer.
Up to 5 years: 14 calendar days
From 5 to 10 years: 21 calendar days
From 10 to 20 years: 28 calendar days
Over 20 years: 35 calendar days
There are special holidays for marriage,
childbirth, and the death of close relatives or
for university exams.
Dismissal: If an employee is dismissed for no
justified reason, the employer is forced to pay
severance, and additionally he must give
notice in advance before terminating the
employment relationship.
Labor rights
Social security contributions
The rights of workers in Argentina are
included in Section 14 and 14 bis of the
National Constitution and by the Labor Act
No. 20.744 and its amendments. Some of the
most relevant sections are shown below:
Both employees and employers are obliged to
make contributions towards the cost of the
health system and to fund future retirement
pensions for employees.
Salary/Wage:
There
is
a
minimum
salary/wage established under a collective
bargaining agreement for each industry.
Annual Supplementary Bonus: The law
provides the right to receive annually an
additional bonus, equal to one twelfth of the
salary received during the year.
Working Hours: The maximum number of
hours established by law is 8 hours per day,
and it should not exceed 48 hours per week. If
the working hours are between 9pm and 6am,
they shall not exceed 7 hours per day. If the
work is classified as possibly dangerous to
the employees´ health, the working day shall
not exceed 6 hours per day and 36 hours per
week.
Employees´ contributions amount to 17% of
their gross wages, are deducted at source by
employers and are paid over in the following
month. The employer’s contribution amounts
to 23% of gross wages and is an additional
cost to the employer.
Additionally, there are reductions
contributions on some labor contracts.
of
Labor risks system
The Labor Risk Law 24.557 provides a
system by which employers must have
compulsory insurance covering contingencies
that may occur to workers such as working
accidents (salaries and medical assistance).
11
Unemployment rates
As at June of each year, the unemployment
rates were:
2004 14.8 % 2008 8 % 2012 7.2 %
2005 12.1 % 2009 8.8 %
2006 10.4 % 2010 7.9 %
2007 8.5 % 2011 7.3 %
INCORPORATION OF
COMPANIES
Main forms of incorporation
Corporation
Limited Liability Company
Company with a Majority Interest Held by the
Government
Collective Partnership
Simple "Comandite" Company (Sociedad en
Comandita Simple)
Joint Stock Company
(Sociedad en
Comandita por Acciones)
Capital and Industry Partnership
Branch Office or Representation of Foreign
Company
Reciprocal Guarantees Company
Cooperation Associations
Joint Ventures
Corporation
Incorporated association with its capital
represented by shares. It is mandatory to
have at least two shareholders. The liability of
shareholders is limited to the number of
shares subscribed.
Corporations are required to submit financial
statements and keep minutes (in book form)
of the proceedings of the board and of
shareholders meetings which have to approve
financial statements, distribute profits and
appoint directors and statutory auditors.
Shares must be registered, ordinary or
preferred, the latter usually have priority at the
time of payment of dividends, which are
usually at a fixed percentage and cumulative,
and preferred shares usually have no voting
rights.
Financial and insurance companies, as well
as corporations whose authorized capital
stock exceeds $10,000,000 must comply with
additional requirements.
Branch Office or
Foreign Company
Representation
of
The formation process is the simplest one: it
is only required to establish a legal domicile in
Argentina, appoint a representative and the
company must be recognized in its country of
origin. No minimum or maximum capital is
required. Financial statements of the
Argentine branch office must be submitted
annually to the General Superintendency of
Corporations
(Inspección
General
de
Justicia). The head office and the Argentine
branch office must have separate accounting
records.
Joint Ventures
- Cooperation Groups
- Joint Ventures
The Corporations Act 19.550 includes a
section devoted to the "contracts of business
cooperation"
having
the
following
characteristics:
Even though Argentine legislation includes
provisions about the administration and
operation of these partnerships, they are not
regarded as corporations per se.
The purpose of these partnerships is to
develop certain stages of a business activity
or to perform a construction job or provide a
service or good, or one or more specific
transactions on a temporary basis in
Argentina.
Their transactions are fulfilled by means of
contributions made by the member partners of
these partnerships.
Companies incorporated overseas shall be
able to take part in these joint ventures once
they have fulfilled the following requirements:
provide evidence of their existence under the
laws of the country where they have been
created, establish a domicile in Argentina and
12
become registered with the Public Registry of
Commerce.
This type of joint venture or temporary
partnership has been used in the past mainly
as a way for different companies to have joint
interests for presenting their bids in bidding
processes held by government entities or
large private business projects.
Accounting Standards throughout Argentina
are similar to International Accounting
Standards Committee (IASC).
TAXATION
General Structure
Legal requirements
All business domiciled in Argentina must
maintain accounting records of their
transactions. The accounting records that are
obligatory are the Daily Transactions book
and the Inventory Book, as well as the
auxiliary books that supplement them.
Furthermore, stock companies are obliged to
maintain books of Minutes of Shareholders´
Meetings and Board Meetings, as well as a
General Shareholders Meetings Attendance
Book and a Stock Record Book.
These books must be bound, with numbered
pages stamped by the Public Registry of
Commerce.
The Corporations Act 19.550 contains
provisions about incorporation, operation and
liquidation as well as the information that must
be included in financial statements.
In addiction regulatory bodies have issued
regulations which supplement the law.
Professional accounting rules
Argentina is a confederation of provincial
states composed of 23 provinces and the City
of Buenos Aires (Capital City). In each one of
them, there is a Professional Council of
Economics in charge of issuing professional
accounting rules within their jurisdictions.
Except for the Buenos Aires Council all the
professional councils of Argentina are
members of an association called Argentine
Federation of Professional Councils of
Economists
(Federación
de
Consejos
Profesionales en Ciencias Económicas –
F.A.C.P.C.E.) that is in charge of coordinating
efforts to issue generally accepted accounting
principles.
The tax system in Argentina is complex and is
subject to frequent changes.
The National Constitution provides for three
levels of government having power to apply,
collect and control taxes: the National or
Federal Government, the Provincial or State
Governments, and Municipal Governments.
Basically, the National Government applies
and collects Income Tax, Minimum Assumed
Income Tax, Personal Property Tax, Value
Added Tax Tax on bank transactions, Internal
taxes on specific Goods and Services, Tax on
Interest and Business Indebtedness, Customs
Duties and taxes for social security purposes.
Provincial Governments are in charge of
Turnover Tax, stamp duties and real property
tax, whilst Municipalities collect Rates and/or
other Taxes.
Recently, some provincial Governments have
created a tax on the free transfer of assets.
The Argentine Tax system comprises taxes
on income and consumption and taxes on
specific assets.
Income Tax
General comments:
Residence:
For the purposes of this tax, there are two
major types of taxpayers: residents and nonresidents.
Residents pay their income tax on both
Argentine sources and overseas sources of
income.
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Non-residents pay only on their Argentine
source of income by means of tax deducted at
source (a withholding tax).
If the income distributed as dividend has not
been subject to income tax, then the dividend
is subject to a 35% withholding tax.
Residents are individuals of Argentine
nationality as well as those of foreign
nationality who have obtained permanent
residence in the country.
The dividends paid by the Argentine
companies to their shareholders have been
included as subject to tax by the recent tax
reform (2013). Dividends are subject to a 10%
tax rate.
Corporations or companies incorporated in
Argentina are also residents.
The legislation defines the cases in which tax
residence is lost, as well as the how cases of
double residence are decided.
If the recipient of the dividend is another
Argentine company, the dividend would not
be subject to tax.
Fiscal period and submission of returns:
Transfer Pricing
The fiscal year of corporations and companies
corresponds to the closing of the financial
statements, which can be fixed at any month
of the year in Argentina.
For individuals, the fiscal year is December
31.
Tax legislation requires the use of the arm’s
length principle for transactions between
Argentine resident individuals or companies
and their related affiliated companies.
Tax returns must be submitted during the fifth
month following the end of the fiscal year.
The difference between the prices charged
and prices charged between independent
parties are taxable on Argentine resident
companies or individuals.
Advance payments of taxes during the fiscal
year are required up to the month prior to
submissions.
Transactions with countries having low or no
taxation are assumed not to have been made
between independent parties.
Definition of income
The list of countries having low or no taxation
was changed in 2013. It was replaced by a list
of countries which cooperate in the exchange
of tax information.
In general, income is defined as the difference
between revenues and every cost or expense
incurred in order to obtain, keep and maintain
these revenues. Depreciation and certain
provisions can also be deducted as expenses.
Income Tax of Corporations or Companies
The rate for this tax is 35 %.
Losses can be carried forward for five fiscal
periods. It should be taken into account that
there are certain losses that can only be
applied to the income of the same type as the
transactions that generated the loss.
There are certain mechanisms that allow the
deferral of profits, such as reinvesting profits
obtained from selling capital goods and
research and development expenses.
Dividends
Income Tax of Individuals
Historically, the dividends of Argentine
Corporations are not subject to this tax on
their shareholders, whether they are
individuals or corporations.
Individuals are entitled to deduct from their
profits certain types of payments per fiscal
year, with some limitations.
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Individuals pay
following table:
taxes
according
to
the
12.25%
Interest on loans obtained overseas:
ACCUMULATED NET
TAXABLE INCOME
TAX
PAYABLE
Over $ Up to $ $ Plus% On the Surplus of $
0 10000 0 9 0
10000 20000 900 14 10000
20000 30000 2300 19 20000
30000 60000 4200 23 30000
60000 90000 11100 27 60000
90000 120000 19200 31 90000
120000 Over 120000 28500 35 120000
Due to the recent amendments made to the
Argentine Income Tax Law by Law 26,893,
income derived by Argentine resident
individuals from the sale of shares and other
securities are subject to income tax at a 15%
rate on net income, unless such securities
were traded in stock markets and/or have
public offering authorization, in which case an
exemption applies
Withholdings taxes on Non-Residents
Non-residents pay tax only on their Argentine
income source.
Nominal rates must be applied to each
payment made, as follows:
TYPE OF PAYMENT Nominal Rate
Transfer of technology that cannot be
obtained in Argentina: technical assistance
– engineering or consulting complying with
the law of technology.
21.00%
Technology transfer: assignment of rights or
licenses for exploiting invention
rights and other objects not contemplated in
the previous section.
28.00%
Technology transfer not complying with the
relevant law. 31.50%
Copyrights (works duly registered). Artists
hired by exempted institutions or
government institutions and for up to 2
months of permanence.
Interest on loans for purchasing real property.
15.05%
Interest paid by Argentine citizens (except for
Financial Institutions) to financial
institutions which are not located in tax
havens.
15.05%
Interest on deposits by overseas investors
with institutions subject to Act No.
21.526.
15.05%
Interest on loans taken by entities subject to
Act No. 21.526. 15.05%
Interest on debt bonds submitted for their
registration in countries with which
there is a reciprocity agreement for
investment protection provided they are
registered in Argentina within two years after
their issue.
15.05%
Other types of interest. 35.00%
Salaries, fees and other remuneration paid to
individuals not resident in
Argentina and not spending more than 6
months in Argentina.
24.50%
Lease of personal property. 14.00%
Lease of real property. 21.00%
Transfer of goods located, placed or used
economically in Argentina, belonging
to overseas companies
17.50%
International Transportation 3.50%
Containers 7.00%
International News Agencies 3.50%
Reinsurance and/or assignments to overseas
insurance companies 3.50%
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Production, distribution or intermediation of
means of projection, reproduction,
transmission, broadcasting of images or
sounds from overseas.
17.50%
Personal property tax
Other payments not covered by the above.
31.50%
Individuals resident in Argentina pay on their
assets in the country and overseas.
Sale of shares and other securities
13.50%
Non-resident individuals only pay on their
assets in the country, and there are some
assets that are exempted from the tax.
Agreements to avoid double taxation
Foreign
corporations
with
certain
characteristics must also pay this tax if the
assets which they own in Argentina are
certain types of real property or financial
assets.
Argentina has signed tax treaties for the
avoidance of double taxation with Australia,
Belgium, Bolivia, Brazil, Canada, Denmark,
Finland, France, Germany, Italy, the
Netherlands,
Norway,
Russia,
Spain,
Sweden, Uruguay and the United Kingdom. A
new treaty with Switzerland has been recently
signed but it is still undergoing its ratification
procedures.
Through
the
application
of
various
agreements, the aforementioned withholding
taxes on payments to overseas beneficiaries
can be reduced and even eliminated.
Minimum Assumed Income Tax
This tax is a supplement to income tax, and
thus this tax is only paid if the amount payable
exceeds income tax payable.
Corporations and companies have to pay this
tax, and individuals have to pay it as well in
some cases.
This tax is applied to assets belonging to
individuals and on net assets of local
companies.
The tax rate varies according to the value of
the assets:
- Assets over $ 305,000 up to $750,000:
0.50%
- Assets over $ 750,000 up to $:2,000,000:
0.75%
- Assets over $ 2,000,000 up to $ 5,000,000:
1%
- Assets over $ 5,000,000: 1.25%
The deduction of liabilities is not allowed,
except for liabilities incurred for purchasing or
improving the family home.
Value Added Tax (VAT)
This tax is paid on a monthly basis, although
some activities (agricultural) may choose to
pay on an annual basis.
Permanent businesses belonging to overseas
subjects must also pay this tax.
This is a general tax, with a few exceptions,
applied on the sale of goods, leases and work
and services provided, and on the importation
of goods and services.
The rate is 1% and is applied to the value of
the assets belonging to taxpayers. The
purchase of first use capital goods (except for
automobiles) and buildings during the first 2
years after purchase are not liable to this tax.
Exports of goods and services are exempted
from the tax. In the case of export of goods
and of certain services, the reimbursement of
the tax paid on the purchases included in the
goods and services exported is provided for.
Any tax paid can be offset against income tax
due in any of the ten following years.
The general rate of the tax is 21%, but there
are also other rates for some activities.
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Tax on bank transactions
Taxes for social security purposes
This tax is charged on entries in bank current
accounts. Other transactions by financial
entities are also taxed such as transfers,
collections etc.
This tax is paid monthly.
The general rate of the tax is 0.6%.
These contributions are calculated by
applying a percentage rate to the payroll;
currently it is 23% in most cases. This rate
decreases if the employees work in the
interior of the country
Internal taxes on specific goods and
services
Employers must make contributions for Social
Security purposes.
This tax is paid on a monthly basis.
It is a tax on consumption applied to specific
goods such as tobacco, alcoholic beverages
and low alcohol beverages, some electronic
appliances, luxury items, diesel engines and
automobiles, ships and aircraft on a certain
value.
It is also applied to some services such as
insurance and cellular telephone services.
This tax is collected at only one stage of the
production and distribution of the goods or
services in question.
The rates vary and range between 2.5 and
30%, except for cigarettes, which are taxed at
60%.
Customs and importation duties
Imports of goods and services are subject to
the following taxes, at the time of making the
customs declaration and the importer has to
pay these taxes to the customs authorities.
- Duties and rates, the percentages vary
according to the product or service to be
imported.
- VAT from 10.5% to 21%.
- 6% Income Tax
- Internal Taxes, if the product is subject to
these taxes.
VAT paid to Customs may be deducted as a
credit in the same month in the case of the
importation of goods, and in the following
month in the case of the importation of
services.
In the case of self-employed people or
business people, the contributions to social
security consist in fixed amounts ranging from
$431.55 to $ 2,461.43 per month, depending
on the activity performed.
Turnover tax
This tax is applied to sales in general, at all
stages of the circulation of goods and
services. It is paid on an annual basis, but
monthly advance payments are made.
This is a provincial tax, and thus, each
province may establish a different rate.
However, in general, we may summarize
them according to different activities:
- Extractive and productive activities: between
1% and 1.5%
- Wholesale and retail sales of goods and
services: between 3% and 5%.
- Intermediation activities: 4.5% and 8%
For activities carried on in more than one
province, there is a distribution system that is
applied by all of the provinces called the
Multilateral Agreement.
Exports are exempted from this tax in all
provinces.
Stamp Duty
This is a provincial tax applied to legal
documents arising from certain transactions
and is payable immediately.
The rates vary according to the legal
documents and the province where the
transaction takes place.
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Real Property Tax
The provinces, in some cases the
Municipalities, establish taxes payable on real
property belonging both to individuals and
corporations.
Municipal Rates
These are municipal taxes arising from the
deemed supply of services by the municipality
in question.
Usually the taxes are based on a percentage
of sales or of the payroll; the percentage
varies according to the services and the
municipality.
These taxes are usually payable every month
or every two months.
Free transmission of assets tax
In the provinces of Buenos Aires and Entre
Ríos, there is a tax on the free transmission of
assets, including inheritance, legacies,
donations, etc. Since January 2011, the tax
rates have been set between 4% and
21.925% according to the taxable base and
the degree of kinship involved.
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HLB in Argentina
how to contact us
Buenos Aires
Alejandro Piazza
[email protected]
Alejandro Almarza
[email protected]
Pablo Cortigiani
[email protected]
Javier Piazza
[email protected]
Horacio Della Rocca
[email protected]
19
HLB
Estudio
Della Rocca - Piazza - Almarza
25 de Mayo 432 Piso 15
Buenos Aires - 1043
Argentina
Telephone: +54(11)5235 2235
Fax: +54(11)5235 2230
Email: [email protected]
www.edpa.com.ar
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